(Independent)– Rolls-Royce has agreed to sell technology firm L’Orange to US aerospace group Woodward for €700m (£610m).
The group said the proceeds of the sale will be re-invested into the company “to improve the resilience of the balance sheet”.
L’Orange is a Stuttgart-based subsidiary of Rolls-Royce’s power systems business with 1,000 employees based in Germany, the US and China.
The firm, which supplies fuel injection technology for specialist engines, has agreed a long-term supply agreement to remain an “important” partner of Rolls-Royce Power Systems, for an initial period of 15 years.
Warren East, chief executive of Rolls-Royce, said the deal was another step in the group’s plan to simplify the business.
Selling L’Orange, Mr East said, will allow Rolls-Royce Power Systems to “focus on other long-term, high growth opportunities and our company to allocate our capital to core technologies and businesses that drive greater returns for the group”.
Russ Mould, investment director at AJ Bell, said: “As well as providing a healthy boost to the balance sheet, (the sale) suggests chief executive Warren East is not sitting on his hands despite reporting good progress on a transformation of the business at last month’s full year results.
“East has now been in charge at Rolls for more than two years having previously earned a stellar reputation at British technology champion ARM. His successful rehabilitation of a fallen corporate titan is only bolstering that reputation.”
The sale of L’Orange has been approved by the boards of both Rolls-Royce and Woodward, and the Rolls-Royce Power Systems supervisory board. The deal is expected to close by the end of the second quarter of this year, subject to approval by German competition regulators.